Calculate the confidence interval for the mean

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Reference no: EM131531158

Your small biotech firm operates a fleet of two specialized delivery vans in Chicago. As a policy, your firm has decided that the operational life of a van is 3 years (a cycle), and both vans are purchased at the same time to receive discounted fleet pricing. The driving demands placed on the vans are uncertain, as are the maintenance costs, and each van is different in its use, demand, and costs. In the past, the firm has been surprised by unexpectedly high (and low) maintenance costs associated with the vans; thus, it is important to analyze the potential of cost variation and to use this information in the annual-budgeting process. You decide to model the arrival of failures (breakdowns of the van) that lead to maintenance costs-each failure has a cost.

You and your staff decide that the model should be simple, but that it should reflect reality. The model should also determine the variation in maintenance costs for 3-year cycles of vehicle use. To determine maintenance cost, you assume the following: 1) Miles Demand for each van is randomly selected from a defined probability distribution (Table 1) for each year of operation; thus, 3 Miles Demand (one for each year) for each van in a cycle. 2) Once the Miles Demand is known, a Yearly Failure Rate is determined (Table 2). This is a Poisson-average yearly arrival rate and a Poisson distribution with this arrival rate is then sampled to determine Actual number of Failures. 3) Each failure arrival is assigned a randomly selected cost from a set of normally distributed costs (Table 3). Finally, costs are aggregated for all vans over the 3 year cycle (an experiment) and many trials are simulated to create a risk profile for total 3-year maintenance cost.

a) Create a Monte Carlo simulation that simulates the 3-year cost of maintenance for the fleet. A suggested structure is provided to simplify your efforts. Simulate 5000 trials (experiments).

b) Provide the risk profile for the model in (a), along with the summary statistics-mean, standard deviation, and 5th and 95th percentile.

c) Calculate the 95% confidence interval for the mean of the simulation.

d) What is the value ($ reduction in cost) that you would derive if you could reduce the Yrly Fail-Rate by 1 for all Miles Demand for Van 1, through a preventative maintenance program? For example, in table 2 the rate for 25000 would change to 1, the rate for 40000 would change to 2, etc. Produce the new Risk Profile and determine the new summary stats.

e). How much would you budget for the 3-year maintenance cycle to meet up to 90% of the maintenance costs?

Table 1

Van 1 Demand (miles)

Van 2 Demand (miles)

Miles Demand

Probability

Miles Demand

Probability

25000

0.5

16000

0.25

40000

0.25

24000

0.25

65000

0.15

32000

0.25

80000

0.1

38000

0.25

 

1.00

 

1.00

Table 2

Van 1 Demand vs Fail-Rate

Van 2 Demand vs Fail-Rate

Miles Demand     Yrly Fail-Rate

Miles Demand   Yrly Fail-Rate

25000

2

 

16000

 

40000

3

24000

65000

3

32000

80000

4

38000

Table 3

Cost of Failure ($) 
Mean 1500
Stdev 425

Attachment:- Problem Excel.xlsx

Verified Expert

This task provides a clear working example on monte carlo simulation. Miles Demand for each van is randomly selected from a defined probability distribution (Table 1) for each year of operation; thus, 3 Miles Demand (one for each year) for each van in a cycle. 2) Once the Miles Demand is known, a Yearly Failure Rate is determined (Table 2). This is a Poisson-average yearly arrival rate and a Poisson distribution with this arrival rate is then sampled to determine Actual number of Failures

Reference no: EM131531158

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Reviews

inf1531158

7/31/2017 4:43:36 AM

Dear Team, sorry for the confusion, I did not notice all the formulas, as I am not good in excel. Thanks for clarifications, Yes I have found all the required details in the solution file. It is really good work. Thanks to support and tolerate me. thanks once again.

inf1531158

7/21/2017 5:56:51 AM

Sir I have concerns about solution missing detailed calculations as promised. 1. missing formula in cell - # of failure cell 2. missing formula - Actual # of failures 3. Why is expert using Rand between 0,8 to generate values? 4. Missing solutions for 3 year cycle (year 1 and year 2) 5. Grand total Van 1-2/YR. 1-2 missing solution also 6. On sheet 1 how did expert generate those 5000 values cell missing solution 7. How did expert generate C and D? Critical I get these detailed calculations on how answer was achieved. My request was for a detailed solution. I will not accept answer without an explanation on how answer was obtained. In the miles demanded column, you are going to need a formula like this: =INT(PsiNormal($AB$6,$AB$7)), for a start. You will also need formulas in the failure rate column similar to =IF(R20<=$T$18,S20,0).

inf1531158

7/21/2017 5:52:45 AM

1 problem excel - analytic solver required /(monte carlo simulation) Sir I need you to provide step by step detailed calculations using Excel/ analytic solver platform (required) Step by step detailed instructions showing how solutions was obtained? Please confirm this problem acknowledgment only once expert is aware this problem required use of Excel analytic solver platform

inf1531158

7/19/2017 6:16:24 AM

need step by step solution for this assignment I have concerns about solution which should be with detailed calculations as promised. 1. missing formula in cell - # of failure cell 2. missing formula - Actual # of failures 3. Why is expert using Randbetween 0,8 to generate values? 4. Missing solutions for 3 year cycle (year 1 and year 2) 5. Grand total Van 1-2/YR. 1-2 missing solution also 6. On sheet 1 how did expert generate those 5000 values cell missing solution 7. How did expert generate C and D? Critical I get these detailed calculations on how answer was achieved

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